EUROPE’S planned financial transaction tax will push up governments’ borrowing costs, hurt pension savers and fail to raise the promised amount of revenues, according to a new report out today.
The charge on trades of shares, bonds and derivatives across 11 countries is set to cut GDP by up to two per cent, hitting tax revenues by one per cent and reducing overall revenues for governments, the report by consultants Oxera for the Association of Financial Markets in Europe (AFME) found.
If derivatives volumes fall by 98 per cent – as they did when an FTT was applied in Sweden – then the tax will raise €20bn (£17bn), well below the €34bn estimated by the European Commission, the report estimates. Combined with falling taxes elsewhere and rising borrowing costs, it may be the tax loses states more than it raises.
Meanwhile customers will also lose out. The Commission estimates investors in managed pension funds will see returns fall eight per cent.
“Taxing funds will not raise the confidence of savers, particularly with regard to actively managed funds where the impact could be large – the eight per cent drop in returns would surely deter many savers,” the report warned.